NPS as a Tax-Saving Investment. Really?

New Delhi, May 9 -- Is it a good idea to put ' 50,000 a year in the National Pension System (NPS) and save some additional tax? It's a simple question, one that is asked often in all kind of forums.

The answer is usually given purely in terms of tax saving. Since the tax saving allowance for NPS investment cannot be used in any other way, the default answer is often that yes, one should invest in NPS because it affords a tax saving that is not otherwise available. And who doesn't want to save tax.

Alternately, you might be told of the NPS' many problems as reasons for avoiding it: the long lock-in period, the compulsory annuity, taxation at withdrawal etc. Coupled with the fact that (practically) no one is actually trying to sell the NPS with any enthusiasm, it means that a lot of people do not make tax saving investments in the NPS. And since tax saving is often the only driver for such investments, they never do get done.

This is often the unfortunate fate of investments that are made with only tax-saving in mind. If they don't get done, then the money doesn't get invested. What about we start from another place? …

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